Europe April ethylene fully settled at €1,345/tonne FD NWE

29 March 2012 15:31[Source: ICIS news]

LONDON (ICIS)--The European ethylene contract price for April is fully confirmed at €1,345/tonne ($1,793/tonne), up by €40/tonne from March, on the back of firm naphtha costs, market sources said on Thursday.

The 3% increase took European contract ethylene to its second record high in as many months.

The hike was largely in line with most players’ expectations as most had accepted that with naphtha prices around €30–40/tonne higher than at the time of the March settlement, ethylene producers would again be forced to target higher contract prices in order to recover lost margin.

“It’s a settlement in line with what everyone expected," said one major producer.

“We hope we get some normal margins, the business has been suffering in ?xml:namespace>Europe,” said an integrated producer.

Sources said that it was too early to say whether ethylene demand would be impacted by another contract price increase. Ethylene has risen by €265/tonne since December 2011.

“Will demand be strong enough to accept the increase?” said a second integrated producer.

“I don’t see the increment being of a scale that would have a significant impact on demand,” said a second key producer, adding that it had hoped for “another €10/tonne” for April.

“Business is good,” said the first integrated producer. “Even the most militant and vocal customer wants additional tonnes.”

However, an integrated consumer said that the increase was larger than it had been expecting. It and another key consumer said that demand was trending lower as a direct result of the higher contract price settlement.

Many are concerned about European derivatives' competitiveness given the strength of the European market, particularly compared with Asia. The higher numbers have been attracting a healthy level of import volumes and consequently spot numbers have been softening since their peak in the mid-to-high $1,600s/tonne CIF (cost, insurance and freight) NWE (northwest Europe) in early March, which was caused by unplanned production problems.

A recent deep-sea deal for early April loading was concluded below $1,550/tonne CIF NWE, sources said this week.

“It’s interesting to see that while contract goes up, spot is coming down. That is not such a good sign for the market,” the first major producer said.